Equity markets continue to hover near record highs as the number of days to sell in May dwindles. The S&P 500 fell slightly more than a half percent on Wednesday but remained within the near-term trading range. This range will likely persist until Friday when the PCE index is released, and all bets are off. At that time, the market will know whether inflation is cooling fast enough for the Fed and better understand when the first interest rate cut will come. As it is, the market is holding out hope for a cut this year, and it may be misplaced.
Assuming the PCE index aligns with the Fed cutting rates this year, the S&P 500 could rocket. In that scenario, the broad market index could gain 200 points by late summer and extend the rally to new highs. If not, this market is set up to fall hard. An inflation-induced correction could shave 5% of the market fast and produce a 20% decline by the time it is over. In this scenario, the S&P 500 will return to its trading range and could remain within it for years.
While artificial intelligence (AI) chip maker NVIDIA Co. (NASDAQ: NVDA) garnered the spotlight on its stock surge through $1,000, a retailer that gapped through the $1,000 barrier received less fanfare. The price action appears similar, but these companies are in completely different sectors: computer and technology and consumer discretionary. Outdoor lifestyle apparel and footwear maker Deckers Outdoor Co. (NYSE: DECK) shares shot through $1,000 and all-time highs under the radar when it released its fiscal Q4 2024 earnings results. However, the company issued slightly lower guidance than consensus estimates, but shares continued to roar higher. Deckers competes with outdoor apparel retailers, including Canadian Goose Holdings Inc.
The Cleveland branch of the Federal Reserve said Wednesday that Beth Hammack, a former executive at investment bank Goldman Sachs, would be its next president effective Aug. 21. Hammack, 52, worked at Goldman Sachs from 1993 until stepping down earlier this year. She was most recently the cohead of global finance, and has also served as global treasurer and held senior trading roles. Hammack was named a partner in 2010. Hammack’s appointment comes at a critical moment for the Fed. Chair Jerome Powell has emphasized that the central bank will keep its key rate at a 23-year high of about 5.3% in an effort to combat inflation, which has fallen sharply from its peak to 2.7%, according to the Fed’s preferred measure.
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